A multitude of subrogated recovery actions are premised on liability for product defects. Sections 60 and 61 of the Consumer Protect Act, No 68 of 2008 (CPA) provide for the strict liability of a producer, importer, distributor or retailor for:
- any harm caused by the supply of unsafe goods;
- any product line failure, defect or hazard in any goods; or
- an inadequate instruction or warning pertaining to such hazard.
The CPA’s provision of faultless liability in this regard renders it more attractive than any claim under the common law, which requires negligence/fault to be proven.
However, the applicability of the CPA is circumscribed: Section 5 stipulates that it is applicable to every transaction concluded within the Republic unless the transaction is exempted by s2, s3 and s4. Section 5(2)(b) excludes transactions in terms of which the consumer is a juristic person with an asset value or annual turnover, at the time of the transaction, equal to or more than an amount determined by the Minister, which is currently R2 million. In many instances where a subrogated recovery claim is large enough to warrant the risk and cost of a recovery action the consumer/insured is likely to be a juristic person with a turnover exceeding this threshold and as such would seem to be precluded from relying on the provisions of the CPA.
Section 5(1)(d) stipulates that the CPA applies to goods supplied in terms of a transaction that is exempted from the application of the Act, and also to the importer, producer, distributor and retailer of such goods but only to the extent provided for in s5(5). The latter provision provides that where goods are supplied in terms of a transaction that is exempt from the application of the CPA those goods, and the importer, producer, distributor and retailer of those goods are nevertheless subject to s60 and s61.
The crisp issue for consideration is whether s5(1)(d) read with s5(5) override the exemption imposed by s5(2)(b), thereby making s60 and s61 applicable to transactions excluded by s5(2)(b). At present, there is no case law of which we are aware that deals with the interpretation of the provisions in question.
Section 2 of the CPA requires that the Act be interpreted in a manner that gives effect to its purposes. Similarly, s4(3) provides that where a provision of the Act can reasonably be construed to have more than one meaning, the meaning which best promotes the spirit and purpose of the Act or which will best protect vulnerable consumers is to be preferred. The primary purpose of the CPA is to promote and advance the social and economic welfare of consumers; however, this purpose is limited to consumers who have not been excluded from the application of the CPA.
Mindful hereof, s5 of the CPA draws an apparent distinction between (i) transactions and (ii) the supply of goods by importers, producers, distributors and retailers. For example, s5(2) seems to confine the CPA’s non-applicability to transaction, whereas s5(5) refers to the supply of goods by importers, producers, distributors and retailers in terms of a transaction.
This suggests that the legislature intended to draw a distinction between the supply of goods by importers, producers, distributors and retailers pursuant to a sale/lease agreement and transactions, which, more broadly, comprises any agreement for the potential supply of such goods. While there is likely to be considerable overlap between the two concepts, they remain distinct.
Therefore, while s5(2)(b) excludes transactions involving certain juristic persons, s5(1)(d) read with s5(5) nevertheless make s60 and s61 applicable to the goods and to the importer, producer, distributor and retailer of such goods.
As such, notwithstanding a transaction being exempted under s5(2)(b), s5(1)(d) and s5(5) create a provision that provides, insofar as there is a supply of goods by an importer, producer, distributor or retailer, said importer, producer, distributor or retailer and the goods nonetheless remain subject to s60 and s61 of the CPA.
It is submitted that, instead of having to invoke common law remedies with onerous evidentiary duties, insurers may in recovery actions rely on the strict liability provisions of the CPA, regardless of whether the insured is a juristic person with a turnover or asset value that exceeds the threshold referred to in s5(2)(b).